Trump: Russia to Immediately Supply Diesel to US and Global Markets
US-Russia Diesel Deal and Its Impact on Fuel Prices
By Bo Erickson and Jarrett Renshaw
Background and Announcement
WASHINGTON, Oct 9 (Reuters) - President Donald Trump said on Friday that Russia had agreed to immediately supply more than 300,000 tons of diesel to the US and global marketplace in an effort aimed at cutting prices for the fuel ahead of the November midterm elections.
The move comes as prices of diesel, used in agriculture, heating homes and trucking goods, are near record highs ahead of the November 3 congressional elections that will determine control of Congress.
Details of the Agreement
Trump said in a post on social media he had a "highly successful" discussion with President Vladimir Putin in which they agreed that Russia will immediately supply the diesel.
An envoy for Putin, Kirill Dmitriev, praised cooperation between Russia and the United States on diesel and energy in a post on X on Friday, shortly after the call.
Future Diesel Supplies
Trump said Russia would supply another 500,000 tons in November, and another 1,000,000 tons "immediately thereafter." Even more would come after that, Trump said, "based on the condition of their diesel refineries" which have been damaged by attacks during Russia's war on Ukraine.
Sanctions and Market Reactions
The unusual move comes as the US has imposed sanctions on Russia's energy companies over its war on Ukraine that began in February, 2022. The Treasury Department issued a general license on Friday allowing importation of Russian diesel until April 7 next year.
Diesel prices, which can drive inflation, are up 70% since the US-Israeli war with Iran began this year, despite two high-profile recent moves by Trump to boost supplies of the fuel: pressuring allies to release emergency reserves and expanding access to tax-exempt red-dyed diesel, which is normally used for farm equipment.
The wars in Iran and Ukraine have triggered an unprecedented global fuel supply crunch, pushing average US diesel prices to $6.28 a gallon on Thursday, according to the AAA motorist organization.
"Lower prices for Americans, especially our Great Farmers, Ranchers, and Truckers, is my Greatest Priority," Trump said.
Defense Production Act and US Policy Response
Presidential Directive
DEFENSE PRODUCTION ACT
Three industry sources said earlier on Friday that Trump will issue a directive in coming days to some US department heads to find ways to control prices of diesel.
The directive, which they said could take the form of a presidential memo, will push officials to find ways to bypass local and state regulations blocking energy production and use the Cold War-era Defense Production Act (DPA) to increase output of oil and fuel.
Utilizing the Defense Production Act
Under the DPA, the president has authorities allowing loans, or loan guarantees to expand domestic manufacturing of critical materials and to require companies to prioritize government contracts for essential goods.
The White House has been weighing how to use the DPA to expand refining capacity as the war with Iran exposes a US vulnerability to supply disruptions and price spikes.
Industry Recommendations
Refining executives told administration officials last month that federal money would be better directed toward making refineries more efficient or expanding existing plants rather than financing an entirely new refinery, which would be considerably more costly and take years to complete.
Gasoline Price Outlook
Trump also said he expected gasoline prices to fall soon to levels around $1.85 to $1.95, well below Friday's average price of about $4.37 a gallon, according to AAA.
(Reporting by Jarrett Renshaw, Bo Erickson, Susan Heavey, Doina Chiacu; writing by Timothy Gardner; Editing by Ismail Shakil and Jonathan Spicer )
